Question

Journalizing Business Transactions Prepare journal entries for each of the following transactions.

Answer 1

Answer:

a.

Cash                                     $1000 Dr

    Common stock                         $1000 Cr

b.

Purchases                          $500 Dr

       Cash                                  $500 Cr

c.

Accounts Receivable               $2000 Dr

        Sales Revenue                      $2000 Cr

d.

Cost of Goods Sold                $500 Dr

        Inventory Account                $500 Cr

e.

Cash                                      $2000 Dr

    Accounts Receivable            $2000 Cr

Explanation:

a.

The cash received as a result of issuing shares is debited as cash is increasing while as the capital is increasing so common stock is credited.

b.

The inventory is purchased for cash so cash is credited and purchases are debited.

c.

The sale of inventory on credit means a debit to the accounts receivable account for the amount of sale and a credit to sales revenue.

d.

When inventory is purchased, we debit the purchases account and credit either cash or accounts payable.

Later on, we transfer the purchases to the inventory amount as it is purchased for the intention of sale. Thus, we credit the purchases account and debit the inventory account.

When a sale is made, we debit the cost of goods sold by the amount of inventory sold and credit the inventory account.

e.

Cash is received so it will be debit and accounts receivable be credited.